The decline in Canada’s dollar will have a number of impacts on agricultural producers. As we recently explained, a weaker currency will make Canadian agriculture and food exports more competitive relative to the U.S. As well, a lower dollar usually means improved basis levels for Canadian producers.

So, what’s changing?

With spring approaching, you’re probably making adjustments to your cropping decisions. Record Canadian grain and oilseed production has changed the market dynamics for both crop and livestock producers.

The importance of the U.S. market to you and the rest of Canadian agriculture however hasn’t changed. This is because most agricultural commodities are priced in U.S. dollars.

The Canadian dollar is at its lowest point relative to the United States dollar since 2009. It has lost 10 per cent of its value from the beginning of 2013. That’s a sharp decline – a decline largely driven by the performance of the Canadian economy.

Weak job growth and high household debt will slow the growth of the Canadian economy. Inflation is forecast to remain low until 2016. And while the Canadian economy struggles, the U.S. economy is showing signs of improvement.

Those different outlooks imply interest rates will remain low in Canada for a longer period of time than in the U.S., putting downward pressures on the loonie in the short-term. That said, we can see the Canadian dollar near 90 cents throughout 2014. Vigilance is still in order however. Focusing on efficiency now will help you to prepare for the time when the dollar strengthens.

A lower Canadian dollar will likely result in higher input prices. Its impact on grain and oilseed prices is less clear. Western Canadian producers may not see the immediate benefits of a lower dollar on crop prices any time soon due to the backlog in the grain handling system.

Is the currency change important to your farm? Absolutely. We’ll keep a close eye on the loonie. If you can’t do the same, make sure to check back with us.